Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, June 29, 2017

Official Report 619KB pdf

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Section 22 Report

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“The 2015/16 audit of Edinburgh College”

Agenda item 2 is evidence on “The 2015/16 audit of Edinburgh College” by the Auditor General. I welcome, from Edinburgh College, Annette Bruton, who is the principal and chief executive, Alan Williamson, who is the chief operating officer, and Ian McKay, who is the chair of the board. I invite Mr McKay to make an opening statement.

I thank the committee for its continued and considered work in this area.

Like many colleges in the further education sector, Edinburgh College has experienced considerable change over the past few years. Our college has been through challenging times, as you know, which are exemplified in what we are discussing today. Indeed, those challenges remain and have most recently been highlighted by the potential cost of meeting the national pay bargaining settlement.

The original matter that was brought to the committee’s attention was the mistaken use of additionality in courses in the college and the knock-on effect of the resulting clawback by the Scottish Further and Higher Education Funding Council of £800,000 in the college’s final accounts for that year. The matter has been fully reported to the board and our response as a college has involved the board and me directly.

That response to the original section 22 report and the related work by the executive and board has been helpful to the college in allowing a forensic examination of our processes and procedures, and it has resulted in considerable improvement in those things. We have reduced the size of the college and have tailored courses to better reflect the needs of our wider community. We have also removed underperforming courses and successfully refocused our offering such that, this year, we have met our SFC targets in overall credits, in higher education credits and in European Union additional credits.

Throughout the process, the board of the college has sought to offer both challenge and support to the executive, and we are pleased to see the process bearing fruit. We have sought to be transparent about all those things from the start. We have worked with the SFC, we have agreed financial assistance with it and we have created a business transformation plan, which has taken the college forward and provided me and the board with the confidence that we need.

The most important thing has been the result of all that work. Two years on, we have much better information coming to the board and the committees, the principal has reshaped the senior management team, we have met our credit targets for the first time since our merger, our financial recovery plan is working and, perhaps most important for me, our award-winning students are registering improved rates of attainment and high rates of satisfaction.

We still have some way to go on the road to recovery and growth, but I believe that the helpful reports from the Auditor General, your work and our own internal processes have shown that we are now on much more solid ground. I hope that we have every chance of reaching our goals successfully.

Thank you for giving me the time to make a statement.

Thank you very much, Mr McKay. We come to questions from members.

In its written submission, which you are probably aware of, the Educational Institute of Scotland made a number of allegations about how the college functions. What is your response to that submission?

I became aware of it when I saw your papers. I was not aware of it before. The principal is probably in a better position to answer on the specifics of the allegations.

I, too, saw it in the committee pack. The submission had not been drawn to my attention prior to the publication of the papers for this committee.

So, this is the first time that you have been aware of the allegations.

It is the first time that the allegations have been drawn to my attention in that way. They had not been drawn to my attention before I saw them in the committee pack. There are on-going discussions with teachers unions about some of the policy matters, but I had not seen the allegations before.

Do you have a response to them?

Yes, I do. Does the committee want me to go into all the areas that are raised in the communication?

It would be helpful if you could.

I will clarify a number of points about the various matters that are raised in that communication with the committee.

First, on credits and additionality, there are no national standards with regard to credits, as I think the committee has discussed with the Auditor General in the past. The credits are agreed by the Scottish funding council with every college as part of its regional outcome agreement. All of that is within an agreed maximum for additionality of 2.5 per cent of total credits. That is the current rule—it changes from time to time but, at the moment, it is 2.5 per cent.

Edinburgh College is no different from any other college in that respect. However, because of what we have been through in the past, we have held down the number of additional credits that we have used and we are maintaining them at below the sector average. When I looked at the credits last week, the figure was 1 per cent. That has been reported to the SFC at the regular bi-monthly meetings that, as the committee will be aware, are part of the transformation plan. The funding council has indicated that it is pleased with the college’s progress and that the college is well under the 2.5 per cent national target.

With regard to our credit targets for this year, not only have we met those targets, as the chair has just said, but that is reflected in the number of real students. In 2015-16, we enrolled 18,541 unique students and, this year, we have enrolled 19,318 unique students. Therefore, as the committee can see, the increase in the credits is down to additional students coming to the college.

I turn to the remarks that have been made about the Edinburgh College units, which is a technical area. I am happy to explain it to the committee in detail or write with more detail if you wish, but I first want to put the issue in context. All colleges can claim for various types of credit as part of their funding package. Those include credits for Scottish Qualifications Authority units, credits for the learning that students do on, for example, City and Guilds courses and credits for the learning that they do on bridge courses to higher education. The EC units are part of that overall package, which recognises the amount of learning that students do in addition to the qualifications that they get.

For example, for a student studying for national 5 in French at the college, we claim the four credits for the two units that are in that course but we can also claim an additional credit if the student sits their exam, because we have prepared them for that. That is an example of where EC credits would be used. The general volume of EC credits is agreed as part of our funding agreement with the Scottish funding council and is published in our regional outcome agreement. That is built in at the point of overall planning for the course of study.

Our policy on withdrawing students has not changed this year, although we have made some changes in-year to the arrangements for that. One problem that we had in former years—I think that the committee asked me about this the last time we were here, or we mentioned it in our written evidence—was that students could be withdrawn by their lecturer simply because they had stopped turning up for class. One improvement that we have introduced this year is that, before any student can be withdrawn from a course, that must be followed up by the manager who is in charge of that area, by student support services or by our finance team. That is because the main reasons why students drop out of class are to do with financial, health, mental health or personal issues. We think that it is really important—for reasons unrelated to credits—that we give every student every chance to rejoin their course. We are looking at that issue nationally in further education.

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We have made inroads into that this year, and we have been much more successful in retaining our students than in previous years. Later this morning, you will consider the report from the Auditor General on the further education sector in 2017. In section 25 of that report, the Auditor General publishes the retention rates for full-time and part-time students in Scotland. We are pleased to report that, compared with the figures for 2015-16, in 2016-17, Edinburgh College not only has improved its performance against all the measures but has done better than the national average for last year. That is down to our making sure that the most vulnerable students—those most likely to drop out of Edinburgh College—are given every chance to get back into their courses and are supported to do so.

I am sorry that I am taking up so much time, but the final point I would like to make—

As you have addressed the issues in the EIS submission, I am going to let Colin Beattie come back in. I am sure that other questions will allow you to give us that information.

Okay. Thank you.

Convener, I heard what the principal said. The submission from the EIS indicates that it can provide documentary evidence relating to withdrawals. Can we write to the EIS, asking for that evidence?

Yes. I am sure that the committee can do that.

I would like to turn to governance and the Edinburgh College board, which seems in this case to have been taking a bit of a back seat. According to the information that we have, the board realised as far back as 2013-14 that there was a problem with the financial information that was coming forward, and it discussed how better financial information could be developed. However, nothing seems to have happened on that. Why?

I think that that question falls to me. You will see in the reports from Caroline Gardner and her team, and from the minutes of the board meetings at that time, that, far from not doing anything about the matter or not being active on it, the board had it almost as a standing item at every meeting. We pursued vigorously what we saw as an on-going issue on which we never seemed to be getting answers.

Not unlike yourselves, members of a board have a tendency to follow the money when a financial issue comes up and to look at the financial systems and so on. That is what the board did in the first place. Paragraph 28 of the 2015-16 audit report notes that we were asking a number of questions and trying to pursue the issues that you have raised. It became clear only later that, although it was presenting as a financial difficulty, the real cause lay on the curricular side. It lay on the supply side of the equation, if you like—we were simply not getting enough bums on seats or enough income coming in through our courses.

I put up my hand and say that we pursued the financial side first. It was only once we found that that was not giving us the answers that the board started to look in other directions. As I said in my opening statement, it was the happenstance of the £800,000 clawback that pointed us towards looking more vigorously at the curricular side. The work that the new incoming principal then did finally allowed us to get to the bottom of the matter and to find where the real problem lay.

I have to challenge any suggestion that the board was not doing anything about it. If you look at the board minutes, you will see that we were challenging it all the way through.

From the time from when the board first became aware that there was a problem with the financial information and the management information, which is a bit broader, how long did it take before the board received information that was useful and on which it was able to act?

The most useful breakthrough was in the examination that the new principal did as a result of the additionality issue. The discussion that we had set the principal down the road of looking at why people had claimed additional things when they should not have been claiming as much as they had. That took us to the realisation that there were underlying issues. Once we got to that point, it did not take us very long at all, but in getting there we looked mostly at the financial processes.

If I remember correctly, the principal’s review happened in 2015.

It was in 2015.

It was at the end of 2015. Therefore, as far as I can see, the board was wrestling with the problems for a couple of years. That seems an awfully long time.

It was less than a couple of years. In those reports, you tend to get only the matter that is under discussion; you do not get the wider context.

The other thing that you have to remember is that we had also parted company with the then principal and we had brought in an interim principal. We had started a recovery plan with the SFC to address the financial issues, and that was going reasonably successfully at the time. However, it still had not led us to a conclusion on where the problems were originating.

We appointed the interim principal in 2014, about six months before Annette Bruton took up office. She was an experienced principal from the south who had dealt with interim principal positions in the past. She was recommended to me by the chief executive of the SFC and I appointed her. My first instruction to her was that I wanted her to look at the whole financial side of the college, to open every cupboard and find every skeleton, because I wanted to find out whether our processes were right. After having investigated, she came back to me and said that, as far as she could see, everything was sound.

We were not sitting on our hands; we were, first of all, making absolutely sure that our finances and financial processes were sound. It was only once we started to redirect our attention, the investigation not having given us the answers, that we moved on to the curricular side after the next report.

I take on board what you say. I understand that these things take time and that it was a difficult situation. However, as a board, if you are not getting financial and management information, should you not do something about it in less time than a couple of years? You say that you did not get adequate information on the crisis that Edinburgh College faced until the principal conducted her review. That was an awfully long time.

No. I said that we did not start to understand the real underlying problem until the review was carried out. We had pursued the problem that was in the reports that we were getting. We sought to get to the bottom of that and make sure that the college’s financial processes were sound and working properly.

The fact that there is an outcome on the financial side does not mean that the cause is on the financial side. That is what we have found in this case. If you look at the Auditor General’s report, you will see that, on a number of occasions, it makes the point that the board pursued the problem vigorously with the executives—we challenged them and we asked them. Every time that we got an answer and came to the next board meeting and the problem was clearly not corrected, we went back and asked again and tried to pursue other areas.

At the end of the day, a board is not in a position to simply walk into the executive’s office and start doing their job for them. You are right to pursue this line of inquiry, but the board did what we had to do in pursuing the executives to make sure that they were doing the job they had to do.

If, over a period of many months, the board is asking questions and not getting answers, should it not take action?

I again refer you to the Auditor General’s reports. You will see there that we were getting answers, but the answers were not addressing the problems that we were asking about. We were getting an answer but, if we had to go back and pursue the matter or go deeper or wider to get the answer, we did that.

I will be the first to say that we were not perfect. However, we sought to pursue the answers because, like you, we realised that there was an on-going problem that was not being solved by the answers that we were getting from the executives. In the end, I also saw a wholesale change in the executives themselves, which I think was the inevitable end of such a process.

Willie Coffey wants to ask some follow-up questions.

Thank you, convener. I would like the principal to clarify the issue of the EC units that Colin Beattie raised. The submission says:

“Our survey showed that many of these units had no teaching materials, no class time provided and no final assessment, yet could attract funding.”

Is that correct? Is it a misinterpretation or is it wrong?

I have not seen the survey. It was not carried out by the college, so I assume that it was carried out by the EIS among EIS members. I would welcome sight of it; it would be useful for me to see the evidence that the EIS has on the allegations in that statement. What I can say is that we have robust processes around what we claim, how we claim it, and the protocols that we stick to, most of which are set down by the SFC.

Perhaps I can reassure the committee with the reassurance that I have had, not only from the internal procedures that we as senior management work on, but from having been audited three times this year—first, by internal audit on our credit claim; secondly, by the SFC in addition to the normal audits that would be carried out on those claims; and thirdly, by Audit Scotland as part of its general audit and section 22 work. None of those audits has thrown up such a problem. Like the committee, I have not been sighted on that survey, and I would welcome the opportunity to see it.

That is fine, but is there any possibility that EC units have

“no teaching materials, ... class time ... and final assessment”

associated with them?

Going back to my earlier explanation, EC units can be used for a number of things, such as the national 5 qualification in French example that I highlighted. In that case, the bit that we are claiming an EC code for is the additional work that is done with students to prepare them for the exam. If we were unable to claim that, we would have to hire staff for a part of the course that we would otherwise not be able to claim credits for. As the committee will recognise, preparing students for their SQA exams is an essential part of any teaching year, and that is the device that is used for that. The teaching materials related to that will be what is taught in the two units.

As another example, we also use EC codes for teaching students who are undertaking higher education courses with us but who are on their way to a course at university—in other words, courses that we are running on behalf of a university. Teaching materials would certainly be used for that; indeed, the staff themselves would be responsible for preparing the teaching materials and doing the planning. I would be surprised if there were no teaching materials, and we would ask the staff why, if no materials had been prepared.

There is no reason why the EC codes should not be claimed. They are a legitimate part of how we make up the costing for a college, and there should certainly be no area of the college in which we are claiming for something that we are not doing. I repeat that I cannot see any circumstance in which what you have referred to would happen, so I would be happy to see any such evidence.

Is the additional work that you mentioned assessed?

In national 5 for French, that is assessed as part of the overall examination that the students sit. People are very familiar with what happens in schools: you hire a teacher for the whole year to teach a class, and some of that work will be the component units of the course and some will be preparation for exams. That is normally what our staff and our colleagues in schools will be doing from February, March or April right up to the exam itself. If we were unable to claim for that, we would not have the funding to hire the teachers to do that part of the course. It is a legitimate part of the make-up of college funding.

The submission from the EIS goes on to raise the issue of resulting and says that, although the choice should be between “pass”, “fail” and “withdrawn”,

“‘The EC code for the Higher/National 5/Advanced Higher ... taught needs to be resulted with a P. This does not indicate that the student passed the exam but that they were prepared for the exam ... ’ ... So not only are the students credited with a pass when they have not actually passed anything, but some of the resulting is done by administrative means and does not even involve the lecturer.”

What is your response to that?

We are getting into very technical territory here, but the first thing that I want to point out is that there are two elements to resulting. This year, we introduced an approach that ensured that students were resulted before lecturers went on holiday. One of the problems that I faced in my first year at Edinburgh College was that a number of lecturers had gone on holiday without completing their resulting, which meant that students could not be credited in time to start their university course or to get their Care Inspectorate registration. That led to a range of problems; as a result, we introduced a system of resulting that ensured that lecturers did the bit that only they knew how to do. In other words, they would be the only ones who could say what the marks for the students were and whether they had passed or failed.

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However, our marks system is not just a case of putting “pass”, “fail” or “withdrawn”. The lecturer gives the mark and indicates whether the student has passed. They can mark the paper as “candidate withdrawn”, or they can mark it as “merit pass”, “fail”, “distinction”, “C”, “B” or “A”. There is a range.

It is not clear to me what the comment that Willie Coffey read out refers to. Staff must result their students in terms of their work, but managers can put in things like the EC codes, because they planned the courses and know how much teaching went into them.

I hope that that was not too technical an answer, convener. It is quite a technical area.

We were following you.

I thank Annette Bruton for offering an explanation.

The last time we heard from Edinburgh College, we were told that the college’s deficit for the financial year 2015-16 was £7 million. Was the final figure as much as £8 million?

No, it is still £7 million. That is where we completed the year.

I am told that that represents well over 80 per cent of the total deficit in the college sector in Scotland that year. Is that right?

I am not certain. I did not look at that.

Another financial year has just been completed. I presume that your financial year runs to April.

An academic year runs to the end of July.

Do you have an estimated outturn for this financial year?

If we exclude the actuarial pension valuation, which we will not know until August, we are forecasting a £3.4 million deficit, against £3.8 million at the start of the year. There has been an improvement.

When do you expect to break even?

We are making good progress. We have had a successful voluntary severance scheme and we have taken out a lot of non-pay costs. The forecast in the 2017-18 transformation plan is a deficit of £580,000. That is what we are looking at for next year, so we are in line with the plan. In the following year, we are looking at a break-even position. That is notwithstanding the national pay awards.

You said,

“That is notwithstanding the national pay awards.”

What impact will the national pay awards have on the figures?

In Edinburgh College, we estimate that around £6 million will be charged. We have put that into our forecasting, and we are making plans to address the £6 million over the next four or five years.

When you say that a deficit of half a million pounds is estimated for next year, is that assuming that you will meet your obligations under the national agreement?

For this year, yes.

That obligation is incorporated. What about next year?

Yes, it is incorporated for next year.

I see that Mr McKay wants to come in.

I am wearing a different hat, convener. I have a wee bit more knowledge of national pay bargaining than my colleagues do, because I was involved in it. Obviously, that circumstance was not known when we were drawing up our transformation plan. The effect of it is not just year on year; there is also a lot of harmonisation and so on.

I am not saying that the committee will be spending even more time on further education matters, but I think that you will find that the knock-on effects of the deal that is under discussion—and as it plays through into support staff, which will happen further down the line—might mean that you have more discussions, with a larger number of colleges.

We are actively in discussion with the Government about the matter, which would have been unforeseen at individual college level, if you see what I mean. It is one of the consequences of moving from individual bargaining at college level to not just national bargaining but a national deal, which will affect some colleges worse than it does others. Overall, the knock-on effect will be considerable across the sector.

I understand that a new assistant principal was appointed at Edinburgh College fairly recently, whose remit includes commercial income. Am I right in saying that commercial income has pretty well fizzled out? I think that you did not have much commercial income in 2015-16.

In 2015-16, the college hit its target on commercial income—the overall commercial and international income was about £6 million. The college hit its overall target in both those areas. However, since around 2013-14, there has been a decline in commercial and international income.

What is the decline? Can you give us figures?

As was mentioned at a previous meeting, international income has dropped by £1.1 million, or 46 per cent. That related to UK Border Agency policy changes, which impacted on college students across the college sector nationally.

I think that Annette Bruton would like to come in.

As Alex Neil said, we have appointed a new head of commercial and international income and a new assistant principal. Although the commercial and international financial return has not been what we would have expected it to be, we are ambitious about growing that income in the future.

We obviously work within the economic constraints in Scotland, but Edinburgh has a very particular economy, and we think that there is an opportunity for us to grow our commercial income. That is our ambition not least because there are fewer people out of work in Edinburgh, so we need to shift some of our effort to ensure that, rather than just making sure that all young people who need a place at college have one, those people who go straight into work from school are being provided by employers with opportunities to train on the job.

Willie Coffey asked, at a previous meeting, about the international position. There are two elements to that. Almost one in five of our students is an EU student, which we have to consider in the current political climate with regard to Brexit. International non-EU students have been affected by the change in the tier 4 visa rules. In 2012-13, we had 215 international students, but after the tier 4 rules changed, that number fell to 128 the following year. We now have only 29 such students in the current academic year; that area has certainly seen a decline as a result of the change in visa rules for further education. Nonetheless, we believe that there is an opportunity for us to grow our commercial income, and we seek to do so.

To go back to the forecast figures for the outturn this year and next year, as against the £6 million figure, what are you forecasting for commercial income?

The forecast is just the same, at this point.

Do you mean that it is £6 million?

Yes. That is a minimum, to be prudent.

Finally, given what has gone on in the past, we have to look at what lessons have been learned for the future. Obviously the role of the board is extremely important, as was outlined in the exchange between Colin Beattie and Ian McKay.

How much does the board delegate to the policy and resources committee? Does the board take primary responsibility, or is it now perhaps delegating too much to the P and R committee? Who makes up the P and R committee? Is it dominated by non-executive directors? Can you tell us what the current modus operandi of the board is? We are partly concerned to ensure that there is no repeat of the problems that we saw in the recent past.

Again, that question is coming to me. You are very well informed about the structure of my board.

I am always well informed.

I commend you for that. Alex Neil has made a good point—he and I have in the past, with different hats on, discussed how well public sector governance can and should operate. Part of the answer that I was trying to give Colin Beattie was that, through that period, the board had very much to look at itself, at processes and procedures and at the very structures—indeed, not only at the structures but at the dynamic of how we were coming to and following up on decisions. You rightly say that we introduced the P and R committee around that time; we did not have such a committee before that. As I described in my answer to Colin Beattie, we were previously relying on board meetings for us to be able to pick up and follow up on what was becoming an active chase on the committee’s part.

It was important therefore that our structures were focused to allow the board to have a committee that was much more actively involved. If you think about it, an audit committee is there as a safety net—it catches things post hoc—but what we did not have, and what became an obvious need, was something that looks forward and plans ahead much more. Boards always have compliance and strategy. I am sorry—it is grannies and eggs here, but those are the two pillars that any board has. I considered that we were sound on our audit side, but we were unable to follow up on our strategic side, and that is where the policy and resources committee came in.

It was also part of our efforts to be as transparent as we could with the SFC when we addressed that first financial issue. I do not know whether the fact comes out in the committee’s paperwork that the SFC was very involved—it was at the table from day 1. When we set up the first recovery plan with the interim principal, we established a joint committee with the SFC. We were not coming up with policies and taking them to the SFC; we were making them up jointly with the SFC in order that we could find a way out of the situation. It seemed to me at the time that there was no point in being anything other than fully transparent.

After changing the structure of the board to introduce the policy and resources committee to enable us to be more strategic in those key areas, we continued the practice that, for those items that are to do with our business transformation plan and related areas, the SFC sits at the table with us; representatives from the SFC are there and take part in decisions, and we often quiz them, in much the same way as you are quizzing me.

Is the P and R committee dominated by non-executive directors?

It will tend to be mostly non-executives. None of our committees contain executives. Again, you have to remember the make-up of a college board. It is a large board anyway, with a lot of non-execs, but it also contains student and staff representatives and so on. There is appropriate representation spread across quite a lot of the committees on that board.

My view, which I hold outside of this process and which is also based on my work in the Institute of Directors and so on, is that, when decisions have to be made that we need to show have not been influenced by any kind of pressure or by an interest that someone might have, the safest road for a board is to have non-executives, because they can be shown not to have an axe to grind. I am lucky in that Edinburgh College’s board has some very experienced and good non-executives.

I accept what you are saying about the need for a P and R committee, but does it not dilute a board’s effectiveness?

I certainly do not think so—I would actually say it was the opposite. Let me choose my words carefully here: the public sector can be quite cumbersome in the way in which it goes about things. In a lot of its work, it does not always have the speed of action that is available in the private sector or even in the third sector. I am sure that that is a problem that you, too, will have come across in previous roles.

Absolutely.

In that situation, you need structures that make that work easier. That was the whole point of the structural change that I introduced in order to establish the policy and resources committee; it gave us the ability to move quickly and with more agility between board meetings. The board meets only four or five times a year. If you were in the situation that we were in at the time, you would have seen the need for an awful lot more agility and more of an ability to shift things forward. That was the reason for the change, and I think that it is worked.

Thank you. At this point, convener, I should apologise, because I have to leave for another committee meeting in the next few minutes.

No problem at all.

Willie Coffey has a small supplementary on the back of Alex Neil’s question.

Annette Bruton talked about the impact on non-EU international students. I think you said that you had 215 in 2014.

That was in 2012-13.

And now that figure has dropped to 29.

It is 29 in the current year. In 2013-14, there was a drop to 128.

So it has dropped about 90 per cent.

Since the United Kingdom legislation came in, the figure has dropped significantly. It is very difficult for students—

Can you put a value on what that, in effect, has cost the college?

It has cost £1.1 million.

In income.

And has the drop in non-EU international students come as a result of those policy changes? Have those policy changes cost the college £1.1 million?

Yes.

Annually.

09:30  

Is there any prospect of the college recovering that money? I know from your responses to Mr Neil that you are making efforts to extend your commercial interests elsewhere.

We are making efforts, but added to that is the fact that overseas companies now require a different delivery model. They prefer delivery in the homeland instead of students coming across to Edinburgh to study, so we have also had to change the model of delivery. I suspect that any growth in that respect will come from delivery in another country.

Thank you.

I would like, at the outset, to get a bit of clarity. Throughout this process, there has been a lot of talk about additionality and various funding issues. When the committee took evidence on this issue in November 2016, the college clearly accepted that there had been failings and that, in general terms, it had been a case of a lot of cooks being involved.

By the time of the Audit Scotland report, the principal had concluded that the vice-principal curriculum and quality was responsible for the additionality issue. Why is there a difference between what I was told in response to the question that I asked in November and what Audit Scotland has reported?

Audit Scotland used information that I provided as part of its section 22 review. I think that, when I met the committee last November, I said—and I still hold this view—that part of the problem lay with the structure. There were two vice-principals and a depute principal who all had a bit of responsibility for making sure that the curriculum frameworks were sound, but nobody seemed to have overall responsibility.

I subsequently carried out a review—which you will be aware of, given that you will have seen it in the Audit Scotland report, and I have reported it to you myself—in which I concluded that there were failings in the way that the structure had been set up, in that everybody and nobody had responsibility. By the time I had concluded my investigation and reported on it to the P and R committee and the board, the responsibility for having sorted out the matter lay with the vice-principal curriculum, who by then had taken on a new role that had all the component parts of that responsibility.

My conclusion in the findings that I reported to committee members was that the responsibilities lay within the new role of the vice-principal curriculum. My findings therefore had two components, the first of which was that the previous structure had muddied the water, with everybody and nobody being responsible. The second related to the fact that in the first few months in which I was in post, a new appointment of vice-principal curriculum had been made and matched in, and I concluded in my report that the problems at that time lay within the purview of the vice-principal curriculum.

That had been an investigation into the general situation, and the board then instructed me to consider whether there was a case to be answered in terms of competency. The committee will be aware that, if it is decided to commence down a competency route, a competency investigation has to be carried out. That was not done in this case. There also has to be a competency hearing, which gives people the right to reply to any accusations made against them. That did not happen in this case either, because the vice-principal in question resigned his post.

All of that tallies, but in November 2016 when I asked directly who was responsible, the clear answer that I was given was that everyone and no one was. When the Audit Scotland report came out, the clear conclusion, drawn by yourself, was that one person was responsible. Which is it? Was that one person responsible for what went wrong? Are you able to clarify that for me?

I will try to clarify the matter for Mr Kerr. The difficulty here is that although I had concluded in my review that the problem lay under one person’s new remit, I did not have the opportunity to carry out a competency investigation or hearing. My investigation was into the general situation, not anyone’s competency. Therefore, even at this point in time, I cannot conclude that someone was incompetent when they did not have the benefit of a competency hearing and the opportunity to defend themselves or, indeed, a competency investigation.

What I can say with certainty is that the difficulty that we were experiencing lay within that vice-principal’s remit and that the former structure had caused an all-or-nothing and everybody-and-nobody problem, but it is difficult to point the finger at someone when they have not had the opportunity either to defend themselves or to go through a competency procedure. Those competency procedures were never carried out, because the vice-principal resigned his post.

Do you maintain that the entire problem was down to one person?

I have never maintained that; what I have always said is that it was a combination of a poor structure and the failings on the part of more than one person. However, when I concluded my investigation into the situation, the area of difficulty lay in the new remit of our then vice-principal.

If more than one person was responsible, what happened to the other people who were responsible?

One person left us because their post ceased to exist in the structure. They took voluntary severance.

So they got a payoff.

I want to make it clear to the committee that I am not suggesting that that person was incompetent; I am suggesting that—

But they held responsibility.

—that person had a remit that was partly responsible.

Right. Mr Williamson, you were part of the team during that period, were you not?

That is right.

Ms Bruton, is Mr Williamson partly responsible for what happened?

I suppose that, corporately, the entire team were responsible. However, as I think I said to the committee the last time—maybe I did not make this explicit—Mr Williamson was extremely helpful to me when I was carrying out my investigation. He came forward to help me with a lot of the problems that the board were seeking to identify.

At this stage, I want to move on and look forward. The voluntary severance scheme is key to the transformation plan; indeed, according to the Audit Scotland report, whether the plan works or not is primarily dependent on the scheme. You are now in the scheme’s third phase, which you launched in April 2017 and which focuses on the academic staff, with the intention of saving nearly £2.5 million. Where are we with the scheme? Has it closed? How many applications of the hoped-for 51 did you receive?

I will start and then pass over to Mr Williamson, who will give you the details.

We have concluded three voluntary severance schemes, the third of which was open to the support and academic staff. We were able to open up the scheme more fully to academic staff, because we had completed our curriculum review in advance of the third voluntary severance scheme. Indeed, you might remember that point from the section 22 report and the responses that the Auditor General gave.

We still have a funding gap to close, but the schemes have largely been successful in getting the staffing and financial reductions that we need. The reason for our welcoming applications from curriculum staff in phase 3 of the scheme was to enable us to see which areas of the curriculum we needed to grow and which areas would contract. Clearly, we would not let staff go in areas that we were trying to grow. We were able to accept applications where they were affordable—the SFC sets the rules for the VS in that respect—and where we knew that students would not be suffering. We needed to make sure that they were not areas of growth. Mr Williamson can give the committee some of the financials and the shortfall that we have still to meet on that.

Up to 2017-18—the budget year that we are just coming into—we had a target of £3.8 million for the voluntary severance scheme. At this point in time, we have achieved £3.5 million, although we are now reviewing some other applications. We have been oversubscribed with applications; we had a run of about 103, of which we have accepted 54, and we are currently looking at the applications to see whether there are any others that we can release.

Just out of interest, you were advanced £1.85 million from the SFC to make that happen. Given the figures that you have just reported, Mr Williamson, it has not quite achieved what you had hoped.

So far, the scheme has cost £1 million and has released £1.6 million.

Just for clarity, what will happen to the SFC funding?

The SFC will take the money back if we are not using it. However, we still have a bit to go before finalising the scheme. Whatever balance remains, the funding council will keep it.

I want to clarify something with regard to that last point and also pick up on Mr Kerr’s point about our not quite having achieved the target. The scheme is still in process, and it is not just us who makes the decision. The SFC has to decide whether some people who we might wish to go actually fit within its framework. This is still work in progress. As the committee will see, we are very close to the target, but I remind members that there are more people in this marriage than just us. We need the SFC’s approval, too, and discussion is still going on about that.

I will bring Liam Kerr back in in a minute, but at this point I will invite Monica Lennon to ask her questions, because I am conscious that she needs to be elsewhere.

Thank you, convener. I will have to excuse myself just before 10 o’clock for 15 or 20 minutes or so, because I have to go to another committee, but then I will come back.

Good morning, everyone. The college’s financial position remains challenging. I am aware that the Audit Scotland report highlights the need for caution with regard to adverse fluctuations in income or costs affecting the college’s ability to repay the £2.9 million in transformation funding to the funding council and suggests that the college could require further support. Mr Williamson has given us some detail on the deficit figure; that seems to be coming down, which is encouraging, but I note that in Mr McKay’s opening remarks he mentioned national pay bargaining and then later talked about that as an unforeseen circumstance. I want to ask Mr Williamson about the scenario planning that has been undertaken on national pay commitments, and then I will ask Mr McKay some questions.

We have included a five-year financial forecast that incorporates both the national pay award and a repayment of the £2.9 million. At the moment, we are in discussion with the funding council about an appropriate payback period for the £2.9 million.

Can I clarify when you started to build the national pay costs into your planning work?

As soon as we started to see the outcomes of the national pay discussions, we started to include them in the financial projections.

Can you give me a more specific date, please?

It would have been about three months ago that we received some of the figures on what the implications were.

But, Mr Williamson, you are aware that the agreement was reached some time ago.

The agreement itself was reached, but we have not yet reached a view on its financial consequences, because we still have to understand exactly what the funding elements will be and whether we will be supported.

What support are you expecting?

We do not know what support to expect. However, in the initial April to July period, the funding council has given all colleges a level of support for the first four months of the 25 per cent award.

I saw that you wanted to come in on that, Mr McKay.

I was simply going to say that these decisions were not made some time ago. In fact, we still do not know the final outcome as far as the national agreement and the actual cost from college to college are concerned.

Just for the record, when was the national agreement signed?

You are taxing my memory there. We had the discussions with the Educational Institute of Scotland in May.

You mentioned that you wear another hat. Will you confirm for the record what hat that is?

09:45  

I am chair of Colleges Scotland’s employers association. As part of that work, I was involved in those negotiations. We got pretty close to the pay cost, but we have still not identified the final terms and conditions changes, which will have a much more significant effect in some ways for some colleges than for others. If the national class contact hours are changed from 24 to 23 or from 21 to 23, in some ways that will have as much effect on an individual college as an increase in someone’s wages. That is still not concluded.

I am a bit confused about some of the timescales. Mr Williamson seems to have said that work has been carried out to look at the costs and obligations only in the past three months. As the chair of the employers association, you have an important seat at the table, but you did not clearly acknowledge that agreement was reached some time ago.

Let me clarify things for you. Would that be helpful?

Yes, it would be.

At the same time as we are face to face with people in collective bargaining, we normally work out the numbers as we go along. When something is put on or removed from the table, people have to know its cost and whether it is affordable. Although as employers we are in a voluntary collective bargaining scheme and the Government is not at the table, it would be foolish for us not to at least check with the Government and the funding council whether the things that are being talked about at the table make sense with their numbers. Let us remember that it is quite new for us to have to work out the numbers for the whole sector, and we have to check whether there will be support from the Government for whatever deal comes out of the other end. All of that happens during the bargaining; it is not a fixed situation.

I turn to what Alan Williamson talked about. Throughout the process, which has gone on for some time, we have in parallel been working out the prospective numbers, had them double checked by the funding council, and run them past the Government so that we can have a real discussion in the collective bargaining room, which can be brought to fruition. That has involved checking back with colleges what the likely outcomes will be. It would be prudent for finance directors across the sector to have a good look at likely outcomes of the bargaining throughout the process. That is what we are talking about.

I do not know whether the committee is aware of how the procedures work in collective bargaining at that level, but the point at which we actually know what the cost will be comes when a circular comes out from the joint secretaries at the end of the process. That is the legal document that says what has to be done. I think that the first down payment, which we hope to pay to our teaching staff in July, came out last week. That is just the first payment; others will follow. The first time the exact cost was known was last week, when that circular came out.

It is prudent for finance directors to see the way the wind is blowing and take account of that in their thinking.

I might be wrong, but I am sure that the Audit Scotland report says that the annual pay increases were agreed in 2015. Perhaps you know better, but we can clarify that afterwards.

Believe me, I know something about that.

I will move on, because I appreciate that the evidence session is not all about national bargaining. However, Mr McKay has made some interesting remarks.

We have talked about the college’s financial situation. An estate management review is under way, looking at opportunities to make savings. I am interested to know what impact that will have across the four campuses, and I am interested in your approach to that and in how it might impact on students and the curriculum review. Perhaps Ms Bruton would like to go first on that.

I will make a couple of remarks and then hand over to Mr Williamson, because this matter sits within his remit.

We had a review done of our estate by an external party because there have been a lot of discussions since the merger about whether we could save money by closing a campus. Having that level of uncertainty is very unsettling for staff. One of the things that that review showed us was that our four campuses are just about the right size for the number of students we have. That was extremely helpful to learn. It is probably more expensive to run four campuses than it is to run one, but our four campuses are in some of the most deprived areas in the region and are well located in that regard. Further, the size of the buildings is about right for the level of activity that we have got—we could expand a little, but not much.

The focus on the estate has been about considering the areas of our provision that we need to change for curriculum reasons, and that has focused on construction and engineering, because those are the areas in which we need to modernise. We might need to shift some curriculum areas or build some new provision on one of those sites but, at the moment, that is the scope of the review that we have been undertaking. Mr Williamson can add a little bit more detail.

We have been looking at the options for construction and engineering in particular, mainly on the basis that those facilities need investment, and we are considering some centralisation of those. Following the report, we know that our capacity is probably close to the right size across the four campuses. In addition, we are considering taking a joined-up approach with other institutions in the west corridor of Edinburgh. Similarly, every year and on an on-going basis, we try to increase the room utilisation—for example, to get more students into classes, which might involve knocking down walls. We are also investing in sustainability, which involves using LED lighting, replacing electricity with gas in our workshops and so on. We are also considering using additional funding from the funding council to install a combined heat and power system.

On the financial savings side, we have probably been saving around £600,000 to £700,000, and there is potential for more savings once we put in the investment of £1.3 million.

Will that saving of somewhere between £600,000 and £700,000 be an annual saving?

It is a recurring saving.

Broadly speaking, you are committed to retaining four campuses.

I was interested in the comments about construction and engineering. I am on the cross-party group on construction, so I declare an interest in that regard. I know that it is an important area.

Mr McKay, you said that you have tailored courses to reflect the needs of local communities. Can you explain your approach to that and how you know that that is working for local communities?

Part of the process that we have gone through has involved an awful lot of looking at ourselves and examining all our processes—not only how we count the beans but how we do the job that we are there to do.

At a board meeting relating to a report on the initial transformation plan, when we were seeking to make financial savings, we considered a report that Ruth Silver produced on widening access, which you might be aware of. Along with people from Skills Development Scotland and the funding council, she carried out some interesting and useful work—which the funding council paid for—for the Glasgow colleges. Basically, she asked all the key stakeholders what they were doing, fed that back into the three colleges, matched that to their output and enabled them to start to make changes to ensure that what they were doing matched what their communities needed. When we heard about that, we were quick to say that we wanted some of that for the colleges in Edinburgh and the Lothians that we represent, and we asked the funding council to fund it, because that work involves considerable expense. That initial work acted as the starting point for the much larger piece of work that the principal and people on the education side have done on the curriculum since then. That gives us a bit of confidence that what we are doing is properly informed by the views and attitudes of our partner councils and so on.

I need to be at the Standards, Procedures and Public Appointments Committee in a few minutes and I do not want to be late or I will be in trouble, so I will finish by picking up on the reflections on governance. Mr McKay, you said that the board was not perfect. Nobody is perfect but, in hindsight, what would you have done differently? Have you, as the chairperson, and other board members undergone any training to upskill and improve?

From day 1 of Edinburgh College being established, we introduced some of the processes that are now being introduced across the sector in relation to board review, with an independent review of the chair and a third-party independent review of how the board works. Those same processes are now being introduced across the sector, mostly because of the damaging reputational issues that there have been elsewhere in the sector in the past three or four years. That is a very good move and it is in line with the work that I have done through the Institute of Directors and so on.

What would we have done differently? Hindsight, as this committee probably knows better than most, is a wonderful thing and, had we known from day 1 that we should be looking much more closely at the very specific way in which we were gathering students and at the number of students who were participating, and had we known that there was capacity out there in the community to feed what we thought was the size of the college when we first put it together, that would have been by far the best thing to do.

You are right that I said that boards make mistakes; I also said that I have some very good people on my board. I think that the only thing that boards can do is to learn from what has happened and seek to change thereafter. I said in my answer to Alex Neil that we have changed a lot of the structures on the board to make it more functional and we worked on the commercial and international position, because we saw that problem coming and wanted to react to it.

We have reacted by making the board able to move more quickly when it deals with such things and we have also taken on board the stuff that you guys on the committee have done in pointing us towards areas that we may need to look at more closely. There is little point in any of us who are charged with trying to get the best for the public purse not listening to people and not changing how we do things, so we are quite grateful for that. We have made a number of changes and I am as confident as any football manager could ever be that we are starting to get things right. I am sure that, if I had a chair, he would say that he had full confidence in me—we all know what that means.

We have done what we can. We are very conscious that public money is involved. I will say one thing to the convener that may be helpful to the committee generally—in preparation for this meeting, after looking at Caroline Gardner’s report, which you will be talking about in the next wee while, I asked Alan Williamson to look at our underlying accounts and our trends for the next three to four years. I was happy when Alan produced those figures for us, because black ink was showing and was growing for Edinburgh College. At the end of the day, as far as my board is concerned and I am sure as far as you are concerned, that is the outcome that we want to see—that we have managed to get to the bottom of these problems and we have managed to move forward into a situation where the college’s finances and work are much more stable.

Thank you. Liam , do you want to return to your questions?

Yes, thank you, convener. We were talking about the voluntary severance scheme and looking at how that will work. My understanding is that part of the decision on who will be chosen and who will be accepted for the voluntary severance scheme is to do with whether courses are efficient. I see from the report that inefficient courses are in danger of being removed, or maybe I can go further and say that inefficient courses will be removed. For clarity, what is efficiency? Is it purely financial? You mentioned that it would mean where students would not be suffering, so what is the definition of efficiency?

10:00  

There are several elements to efficiency. One is class numbers, but there is not an absolute number. For example, a course in business can run with much larger numbers of students than a course where we are making provision for young people with additional support needs. As you would expect, we set the course targets for each subject area according to what is pedagogically sound and what breaks even, and we might even be prepared to make a loss on some courses because they are for vulnerable students or because they are entry-level courses and we know that, if students pass those courses, they will go on to sustain other courses and get into work in the future. We set an efficiency quotient for each course on a case-by-case basis, so, depending on aspects such as safety, we might be able to have a class of 30 undertaking a course in economics, but we would not have a class of 30 in a construction lab, because that would not be safe. For every course in the college, we have worked to identify what would be an efficient number.

That is one element of efficiency. Another element of efficiency is the staff costs and overheads that go with a course. We would seek to run every course we could for students, but we cannot run courses—unless they are for students who are very vulnerable and have additional support needs—with only two or three students, and you would not expect us to.

We are trying to maximise the benefits for students, and we are also trying to reduce courses where there is little or no demand. There are some courses in the FE sector where demand is tailing away, and there are other courses where demand is growing. Monica Lennon’s question on the curriculum was about how to get that right, and we are trying to run a curriculum for the future. In the past, we have turned away too many students who wanted to come to Edinburgh College, because they did not have the qualifications that they needed to get into college. We are now investing more heavily in courses that are viable and can run and which give people the qualifications that they need to get on to the course they desire.

It would be nice and simple if I was able to say that the quota was 15 or 20 or 25, but it depends on the factors that I have described. We now have an extremely detailed analysis across the whole of our college about what the numbers have to be for each course. If a course is not viable, we seek to ensure either that the students can join another class, where there is another one running in parallel, or that they can change the days when they come on a course or can find another course that suits them. It is always a balance between student demand, what employers need—because there is no point in training students for something in which there are no jobs—and the efficiency of the college, because we are spending public money. We do not have a blank cheque to run courses for everyone regardless of whether they are efficient or not.

Could you give a brief example? What are some of the courses that are inefficient and have thus been cut or scaled back?

Let us say that we are running eight parallel childcare courses and that we have offered those courses on lots of different days, but we find that on each of those courses we get only 14 students. Even with the national average of dropout, that will come down by a couple of students by the end of the year. That begins to make those courses inefficient. If, however, we consolidate the days on which those courses run, while maintaining as much flexibility as we can, we can combine them so that instead of running eight we are running six. Then we will have more efficient numbers, of 25, 26 or 27 students in each of those courses, and in childcare it is possible to run courses with that number of students.

But you are cutting some courses?

We are not cutting any students, but we are cutting the number of occurrences of courses.

So there will be fewer course options.

No, there will not be fewer course options. There may be fewer days on which the course runs, or there may be less flexibility.

What impact assessment has been done by the college on the implications for students? You mentioned the labour market. What impact assessment has been done on your ability to provide people to the labour market and, indeed, to provide routes to university?

That is part of our wider curriculum review. In the past couple of years, far from cutting courses we have been introducing courses to meet that need.

Has an impact assessment been done before undertaking the scheme that will result in voluntary severance?

An impact assessment would be undertaken if we were going to close a course, and an impact assessment is always done when we create a new course.

Has an impact assessment been done? We heard earlier that there is a very far-advanced voluntary severance scheme and there are very far-advanced programmes to transform the product. What impact assessment has been done—in the past tense—to check the impact on the labour market, the students and progression to university?

We have done an impact assessment on the voluntary severance scheme and the effect that it will have.

Was that done in consultation with the students and the labour market—with local employers, for example?

I do not have the detail of the impact assessment with me. I will have to write to the committee about that.

I would be grateful for that. Thank you.

You talked about adding students to courses so that the courses are now bigger. That will, I presume, have a significant effect on staff and on the ability of the college—with fewer people—to deliver those bigger, more fully subscribed courses. What assessment has been done of the impact on the staff of the changes that are being made?

I am just checking with Mr Williamson, because that is charged in Mr Williamson’s bailiwick. I believe that it will have been done as part of the same impact assessment that looked at the voluntary severance scheme.

Perhaps that information can be provided.

I will wrap up with a final question on which, perhaps, I might bring Mr McKay back in. However the financial instability—if I can put it that way—was incurred, is there a danger that the drive for financial stability that we have been talking about will have a negative impact on course provision, the learning journey and the staff experience?

Any change in any public service can always be regarded as having a negative effect somewhere. In this particular instance, the board has been at pains to come at the whole question from the opposite direction from what some of us may remember from the days of value for money, Mrs Thatcher and so on. In fact, we have come at it by looking at what need is out there, asking what kind of curriculum Edinburgh College should be offering and using that as our driver to determine how we can produce a college that delivers that curriculum efficiently.

In discussion, the board made it clear that we did not want the exercise to be driven by cost cutting or something that might have the unforeseen consequence that Liam Kerr described. At the end of the day, that would not achieve what needs to happen. At Edinburgh College, we have tried from the outset to learn from the best of the historical FE provision in the area and to move forward into something that the community wants.

I am reasonably confident that we started by asking what is good for students and the community and what will make a college that delivers that. We have then tried to do that in such a way that we do not see negative consequences. By all means, let us have a discussion about whether we manage that, either here or somewhere else—give us five years or so to see how it comes out.

As I say, I am hopeful that, in beginning to look at our underlying trends and the stability of the college going forward, we are starting to see black ink, which is helpful for everyone. It is helpful for the general mood within the college and for our staff, and it takes everyone forward. That is what the board wants to see. I suspect that it is what the executive wants to see and, indeed, what this committee wants to see as well.

We look forward to seeing that.

Let us return to the EIS submission. Your explanation of the change to the system of withdrawals was that you did not want a withdrawal to be done by a lecturer; you wanted to do follow-up. I absolutely understand that. When is a withdrawal reported? Based on the follow-up that you are doing, how many of the students re-engage with courses?

A withdrawal is reported as soon as we are certain that so much time has passed that the student would be unable to catch up or when the student can tell us face to face or in writing that they are definitely not coming back. That varies from student to student, but we try to get the students back into their classes in a matter of days rather than weeks, so it is reported as soon as we know that the student has withdrawn from their class.

I am sorry, convener—what was the second part of your question?

How do you know how successful you are? What percentage of those students return to their courses and re-engage?

This year, our retention rates are up significantly, so—

That was not my question. I am asking specifically about the students who would otherwise have been marked as withdrawals and with whom you are working to get them back into the college.

I will need to give you the figure later, but I can tell you that, last year, 5.2 per cent of our students withdrew and, in the current year, which ends tomorrow, 4.6 per cent of our students withdrew. My belief is that the change to the withdrawal system has helped us to retain more students.

Okay. The system is not gaming the numbers but providing you with an early opportunity to engage with students.

That is correct.

On the resulting EC units, I understand what you say about national 5 French preparation, which you gave as an example. I assume that that would involve teaching materials and class time.

Yes, it would. You would expect that, if a student was being prepared for assessment, it would be done using the materials that were needed for the unit. However, the teacher would also prepare materials for practice assessments and work with students on the areas of their work that they needed to revise individually or collectively.

Are you in a position to guarantee that no resulting EC unit has no teaching materials, class time or financial assessment?

There should be no examples of teacher time not having been used to support students in, for example, studying for their exams, although that might be part of the overall costs of the staff for the whole year. I would be happy to consider anything that anybody thinks is problematic. I do not expect to see such a situation.

I would have thought that you, as the principal, might want to investigate that.

I will, indeed.

You came to the committee asking for a survey that was conducted by the EIS. I will be helpful, as I hope that the committee can be. We have had a number of pieces of correspondence from the EIS since the section 22 report on Edinburgh College landed with the committee. It strikes me that there might be a fundamental issue of communication—of which we have had an example today—between the college, the board and the EIS. Are you taking any action to address that?

We are. A key element of the work that I have been doing over the past two years is trying to build industrial relations in the college. In fact, we have some examples of excellent industrial relations in Edinburgh College, because we have more than one union. I have introduced a range of measures that seek to support partnership working. Some of my EIS branch officials are sitting behind me—I cannot see their faces, but you can. In any job that I have done, I have always worked well with the trade unions. I believe that strong trade unions make for a good workplace, and I will continue to work towards better partnership working with the EIS in particular.

Thank you. That is helpful.

As I am back from the Standards, Procedures and Public Appointments Committee earlier than expected, I will ask about an issue that was raised with me recently. It concerns another college, where there is a practice whereby students who drop out after a couple of weeks—certainly, before December—are pursued for a fee repayment. I can tell by the look on your face, Ms Bruton, that that probably does not happen in Edinburgh College. Are you aware of that practice?

No, I am not.

It is not part of your procedures.

No.

That is reassuring.

We have concluded all questions from the committee, so I thank the witnesses for attending and suspend the meeting briefly to allow for a changeover of witnesses.

10:15 Meeting suspended.  

10:17 On resuming—